KPMG’s Week in Tax: 30 October - 3 November 2017

KPMG’s Week in Tax: 30 October - 3 November 2017

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U.S. tax reform

The Ways and Means Committee initiated the tax reform process in the U.S. House of Representatives with the release of legislative text of a tax reform bill. The committee also provided a section-by-section description of the provisions in the tax reform bill.

Bulgaria: The procedure and form to use in filing CbC reports in Bulgaria, as well as the related notification rules, were approved. The CbC report and notification are to be filed electronically, and the electronic services on the tax authority's website are available no later than 1 December 2017.

Asia Pacific

Thailand: An income tax treaty with Cambodia was signed, and would enter into force once ratified by both countries—expected in January 2018.

India: The Supreme Court of India held that the outsourcing of work to India—a subsidiary of a U.S. company, providing back-office support services—does not constitute a fixed-place PE in India.

India: A tribunal held that the payment for distribution rights is taxable as royalty income under the provisions of the Income-tax Act, 1961 as well as under the India-Ireland income tax treaty.

Philippines: A bill that includes an excise tax on sugar-sweetened beverages is pending consideration in the Senate after being passed by the House of Representatives.

New Zealand: The new government has put forward tax policy positions (or expected positions), with particular interest being paid to the Tax Working Group and progress of other tax policy changes.

Singapore: A measure in a draft bill would amend the property tax law, and would “carve out” and impose property tax on machinery used for purposes of controlling, maintaining, or modifying of the temperature, atmosphere, humidity, or air quality on the taxpayer’s premises. In other words, this proposal would separate “pure” manufacturing machinery from machinery that is regarded as “peripheral” to the manufacturing process.

Americas

Argentina: A tax reform and labor plan proposes to reduce the rate of corporate income tax to 25% (from 35%) when implemented over a five-year period.

Canada: The third reading of the British Columbia budget update bill includes most of the tax measures from the province's recent 2017 budget update, as well as several tax measures that are identical or similar to ones that were in British Columbia’s previous 2017 budget bill, including a proposed increase to the rate of corporate income tax to 12%—that would be effective 1 January 2017.

Canada: The 2017 federal budget bill #2—that includes tax measures from the 2017 federal budget and corporate income tax measures from draft legislation released in September 2016—received first reading.

Canada: The 2017 Nova Scotia budget bill was enacted, and contains most of the tax measures announced in Nova Scotia's 2017 budget, including a measure to increase the small business income threshold to $500,000* (from $350,000), effective 1 January 2017.

Canada: The Department of Finance announced that it was abandoning certain proposals to change the private company tax rules, and that it was modifying others.

Canada: A proposed goods and services tax / harmonized sales tax (GST/HST) bill contains many of the proposed measures included in previously released draft legislation, including changes to pension plan rules and drop-shipment rules, and would affect businesses across many industries.

United States: KPMG has prepared a Spanish language and Portuguese language report on the pending tax reform bills expected to be released by U.S. Congress.

Europe

France: The government announced details of proposed “exceptional surcharges” to corporate income tax for largest companies that would be intended at partly offsetting an estimated €10 billion in lost revenue as a result of a decision of the French Constitutional Court that held the 3% tax on distributions was unconstitutional.

Belgium: The Belgian government has reached an agreement on legislation for implementing corporate tax reform, to take place in two phases: in 2018 and 2020.

FATCA / IGA / CRS

Japan: An updated version of “frequently asked questions” (FAQs) was issued as guidance for Japanese financial institutions concerning the technical description and specification for filing reports under the common reporting standard (CRS).

Dominican Republic: Information was released about a new web-based platform that will allow financial institutions in the Dominican Republic to comply with the provisions under the FATCA agreement between the Dominican Republic and the United States.

Trade & Customs

Netherlands: The Court of Justice of the European Union (CJEU) issued a judgment in a case concerning a recall and warranty, and on finding that the period for price adjustments had been extended from one year to three years, concluded that recalls necessary to avoid risks of failure must be treated equally as defective goods.

United States: Customs and Border Protection (CBP) reported the issuance of a general notice concerning a modification and clarification to the post-summary corrections (PSC) and periodic monthly statements (PMS) in the Automated Commercial Environment (ACE).

United States: International Trade Commission (ITC) recommendations from their global safeguard investigation regarding imports of crystalline silicon photovoltaic cells—to be forwarded to the U.S. president—includes a combination of quotas, duty rates (up to 35%), as well as the possibility of selling import licenses.

United States: A final rule clarifies the license exceptions under the Export Administration Regulations (EAR) for governments, international organizations, and international inspections under the chemical weapons agreement and the international space station.

EU: The Combined Nomenclature (CN), that forms the basis for the declaration of goods in the EU (and thus, the rate of certain customs duties), has been updated and is applicable as from 1 January 2018.

NAFTA: The fourth round of trade agreement re-negotiations were completed by Mexico, Canada, and the United States.

United States

The IRS issued a reminder to taxpayers with individual taxpayer identification numbers (ITINs) set to expire at the end of 2017 to submit renewal applications as soon as possible. Failure to renew by year-end will cause refund and processing delays in 2018.

Announcement 2017-15 provides relief for taxpayers who were affected by Hurricane Maria or the recent wildfires in California. The relief specifically concerns loans or hardship distributions made by qualified employer plans to employees (or former employees) whose principal residences or places or employment were located in one of the areas identified for individual assistance by the Federal Emergency Management Agency (FEMA).

The IRS issued a reminder to individual taxpayers, including those in certain disaster areas, that if they want to file a 2016 tax return electronically, they must do so by Saturday, 18 November 2017.

Notice 2017-67 provides guidance on the requirements for providing a qualified small employer health reimbursement arrangement (QSEHRA) under section 9831(d), the tax consequences of the arrangement, and the requirements for providing written notice of the arrangement to eligible employees.

Notice 2017-68 extends the period for relief from application of rules for “United States property” when controlled foreign corporations (CFCs) need to move the property—that is, “section 1221(a)(1) property”—because of the damage caused by Hurricanes Irma and Maria.

Updated data was released to determine low-income community (LIC) eligibility under the New Markets Tax Credit (NMTC) and other programs.

A KPMG report concerns recently passed legislation that provides a federal income tax credit to certain employers that continue to pay their employees during periods of time when their places of business are inoperable due to the effects of one of three recent hurricanes.

The Colorado Department of Revenue issued a “general information letter” concluding that the sales and use tax exemption for manufacturing machinery and tools applies to contract manufacturing even when the finished goods are not sold but are used by the third party in its own business.

The appellate division of the New Jersey Supreme Court affirmed a lower court decision allowing adjustments to reflect differences between federal and state tax treatment of the taxpayer’s assets in its vehicle leasing business.

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